Bridging GST shortfall: Telangana 23rd state to choose Option 1 : 19-11-2020

The central government has said that Telangana has become the 23rd state to choose option-1 of the borrowing plan, under a mechanism to raise resources to compensate states for their GST shortfall. The state has also got the permission to borrow an additional Rs 5,017 crore this fiscal (0.5% of Telangana’s GSDP) as a separate incentive for joining the scheme.

The central government has estimated Rs 1.1 lakh crore as GST shortfall for states this fiscal from the level of protected revenue guaranteed to them under the law. States are assured of a 14% year-on-year growth in GST revenue which is met by their own revenue and any resultant shortfall is made up from cess funds.

At least 8 states continue to shun the scheme as they want Centre to borrow Rs 1.8 lakh crore — total shortfall this fiscal including the amount owing to GST implementation and due to the impact of Covid. The Centre has argued unrestrained borrowing will lead to higher yields.

The states who have chosen option-1 are being disbursed the amount of shortfall arising out of GST implementation through a special borrowing window arranged by central government. “The window has been operationalised now and the government of India already borrowed an amount of RS 18,000 crore on behalf of the states in three instalments and has passed it on to 22 states and 3 Union Territories on October 23, November 2 and November 9,” the government said.

It added that Telangana will receive funds raised through this window in next likely borrowing instalment on November 23. Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, states are also entitled to get unconditional permission to borrow the final instalment of 0.5% of GSDP out of the 2% additional borrowings permitted by the the central government under Atmanirbhar Abhiyaan. This is over and above the special window of Rs 1.1 lakh crore.

States who have opted for Option-1 are — Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Telangana, Tripura, Tamil Nadu, Uttar Pradesh, and Uttarakhand, along with the three Union Territories of Delhi, Jammu & Kashmir and Puducherry.

Source : Economic Times